http://enterpriseuk.co.uk/wp-content/uploads/2017/10/05.jpg500997Daniel Quinterohttp://enterpriseuk.co.uk/wp-content/uploads/2017/06/EmtUK_FinancialEcosystem-300x98.pngDaniel Quintero2017-11-07 09:25:362017-10-31 18:29:36How making British industry digital could boost the economy by billions and create thousands of new jobs

Research shows that investors are putting more money than ever into crowdfunded businesses. But does the sector really offer attractive returns, asks Ben Lobel

If a business needs finance to expand, improve facilities or purchase new equipment, it can either seek to borrow money or ask for capital investment in return for equity, i.e. shares.

But while sources of equity finance used to be restricted to the likes of angel investors and venture capital trusts, today equity crowdfunding operators such as Crowdcube, Seedrs and Angels Den have emerged to enable businesses to raise money online from large numbers of individuals, each making relatively small investments in the hope of scoring a healthy return in the event of an IPO, merger or exit.

As an investor, the process is usually straightforward. Often it’s as simple as signing up to a website, browsing the video and written pitches available, and then choosing what to invest in and how much. Once the legal documentation is completed, you will become a shareholder in that business, be sent a share certificate and appear on the business’s share register at Companies House.

It’s a formula that is proving popular. Today, there are 235 live crowdfunding platforms in the UK, according to data from finance analyst TAB, and investors’ appetite for crowdfunding businesses has grown considerably since 2015, statistics from Businessagent.com reveal. So far in 2017, the average monthly cash injection from all investors across all equity crowdfunding platforms is £13.5 million, compared with £7.4 million in 2015, with a monthly high of 11,202 investors contributing to 93 projects in May this year.

Jon Medved, CEO of crowdfunding platform OurCrowd, says the advent of such organisations has disrupted the way that start-up companies are funded, democratising both sides of the marketplace, meaning investors and entrepreneurs. ‘By opening up opportunities to investors from around the world, the phenomenon is breaking down the geographical barriers that plague many start-ups, particularly those in areas where VC funding is not plentiful,’ Medved says.

For businesses, crowdfunding can represent a welcome source of free publicity in addition to funds. But to what extent does it present an opportunity for investors in 2017?

The government is considering launching a new investment fund to support the growth of start-ups in the UK, fearing a loss in access to funds from the European Investment Fund (EIF) after its exit from the European Union.

EIF-backed funds have participated in around £1 billion per year of private equity investment into UK firms between 2014 and 2016.

According to a new consultation released by the Treasury, UK start-ups struggle to reach their potential in the latter stages of investment and growth, falling well short of what is seen in the US and China. The government wants to set up a National Investment Fund to help more young, innovative firms in the UK reach Unicorn status (valued at over $1 billion).

Equity investing in early stage start-up businesses is becoming an increasingly common component of a diversified portfolio. Part of the attraction of funding start-ups continues to be a highly attractive tax regime that encourages investment into seed enterprises – with generous tax reliefs that mitigate much of the risk of investing in a high-risk asset class.

In their 2017 manifesto, the Tories described two incentives for investors as ‘world leading’: “We will help innovators and start-ups, by encouraging early stage investment and considering further incentives under our world-leading Enterprise Investment Scheme and Seed Enterprise Investment Scheme.” Page 77, Conservative Party 2017 Manifesto.

The Enterprise Investment Scheme (EIS) was set up in 1994 and continued to be supported through Labour governments. It has since been made more attractive by the Conservative government, and has established itself as a part of tax legislation that neither of the main parties would be likely to compromise. The Seed Enterprise Investment Scheme (SEIS), established in 2012, is an extension of EIS and offers even more generous reliefs.

http://enterpriseuk.co.uk/wp-content/uploads/2016/07/ducks.jpg5001000Jacqui Weylerhttp://enterpriseuk.co.uk/wp-content/uploads/2017/06/EmtUK_FinancialEcosystem-300x98.pngJacqui Weyler2017-07-25 15:46:022017-08-01 15:49:17Making the most of early equity investment opportunities

Within the next 15 years, almost all of the 6 million Australians who make up the “baby boomer” generation will reach or be well into their retirement. The vast majority will not be wealthy enough to get by without an income unless they sell the equity in their home and move into some form of retirement accommodation.

The sector is set to boom in coming years and the small cap equities fund managers at UBS are already buying in.

Not that the sector has been an easy one for investors. One of Australia’s largest retirement village operators, Aveo Group, shed 15.2 per cent of its value last month after a Fairfax/Four Corners investigation revealed many disgruntled current and former residents, who claim they were exploited.

Most other large ASX-listed operators are trading well below their 2016 highs.